Denel can now pay salaries thanks to intensive financial monitoring

State-owned defence and technology conglomerate Denel is cleaning up house one contract at a time, Parliament’s Portfolio Committee on Public Enterprises heard this week.

Among issues raised by Denel chair Monhla Hlahla during a presentation were the decline in revenue, poor and weak contract management and the closure of the ill-conceived Denel Asia joint venture. It also emerged that the pilot bursary awarded to the son of former North West premier, Supra Mahumapelo, has been “terminated”.

A statement issued by Parliamentary Communication Services on behalf of the committee has it that closing down of “the controversial Denel Asia” will take some time to finalise.

“The committee previously questioned why Denel Asia was established and was informed by the previous board Denel Asia was set up as a legitimate company to expand its footprint in the Asian market. The committee suggested at that time there was no need to expand as Denel had an existing footprint in the Asia. The committee was of the view the company was set up as a catalyst for state capture,” according to the statement.

Hlahla told the committee revenue declined by 38% in the 2017/18 financial year which was partly due to weak contract management.

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Forensic investigations at Denel are still underway and Lungi Mnganga-Gcabashe, committee chair, told the Denel delegation that the outcomes of the investigation should lead to consequence management. This would be appli cable to Denel personnel implicated and “politicians found to be involved in looting at Denel”.

According to the Daily Maverick, Denel posted a R1.75 billion net loss for the 2017/18 financial year, incurred some R500 million worth of irregular expenditure and is apparently paying four times the European rate for technical assistants. These, the online daily has it, are “effectively arms dealers”.

Close monitoring of cash flows has seen Denel’s bank balance increase to R200 million - sufficient to cover salaries. This is unlike in September when managers were short paid.

Challenges remain. According to the Daily Maverick, “for Denel this means clawing back good governance and finances, one investigation, one contract at a time”.

Hlahla also told Parliament’s public enterprises committee that Denel is not for sale. “As recently as last week, somebody came to meet us for the first time, we disagreed with their belief that Denel is up for sale.” Saudi Arabia and possibly Qatar were interested in acquiring a stake in Denel.